SmartSTART Series: Start-up Basics

1. SmartSTART Series: Start-up Basics

2. Experienced executive volunteers Seminars and workshops Free Mentoring In person Via e-mail Nationally: www.score.org East Bay SCORE In person at several locations Web: eastbayscore.org About SCORE

3. East Bay SCORE • 48 experienced counselors • Serving: Alameda, Contra Costa & Solano Counties • E-mail: info@eastbayscore.org • Located at: 492 9th St. ,Ste. 350 Oakland, CA 94607 T: 510-273-6611 Mentoring Locations: see your handout

4. Start-up Myths Entrepreneurial Skills Different Paths to Owning your Business Marketing & Selling Organization, Legal Structure, Insurance, Regulations Funding and Cash Management Business Plan Next Steps Agenda

5. Your SCORE Mentors today: Laszlo G. Bonnyay Sylvia Cunningham Gene Page Antonio Rodrigues James Clark Briefly tell us a bit about you: Your name Your Business idea (s) What you want to learn today Nice to Meet You!

6. Start-up Myths

7. Myth: All I need is a good idea to be a successful entrepreneur. Myth #1 Reality: A good idea is a great start, but it takes hard work, research, and planning plus successful plan execution to turn your idea into a profitable enterprise.

8. Myth #2 Myth: If you go out on your own, you won’t have to work so hard or such long hours. Reality: You’ll probably work harder and longer than you’ve ever worked before, but you might enjoy it more. Exhaustion fades at the moment you proudly say, “I did this!”

9. Myth: You’ll be able to deduct everything so you don’t have to pay taxes. Myth #3 Reality: You will pay taxes (income, sales, property, licenses, etc.) Income taxes are based on your revenue less all business related expenses (“net” income).

10. Myth: If you work independently, you won’t have to report to a boss. Myth #4 Reality: You don’t have a single boss, you have many: your clients and customers, your suppliers, city officials, etc. They each have specific needs and requirements. Your challenge is to keep all of them satisfied.

11. Myth: Business owners get to do the work they want to do and only what they find interesting. Myth #5 Reality: Think again. You will have to wear many hats and juggle many skills, some of which may bore you or be downright challenging.

12. Myth: If you choose to be self-employed, you’ll be limited in what you can achieve, since you’ll be working alone. Myth #6 Reality: There will be limitations but also plenty of opportunities. Be realistic, but don’t trap yourself with self-imposed limitations.

13. True or False: Ninety percent of new businesses fail within the first four years? Or maybe it’s 80%? Or 70%? The Big Myth

14. Reality: Business Success Percent of New Businesses after Four Years (Source: SBA)

15. Sufficient capital (including working capital and reserves) Ability to lead and manage multiple tasks. Knowledge of and experience in the industry (Customers, competitors, opportunities) Discipline…and flexibility Willingness to learn from others Critical Success Factors

16. Entrepreneurial Skills and Critical Functions

17. A leader, a self-starter Driven, decisive Focused, flexible Determined, Persistent Disciplined, Organized Resourceful, Responsible Healthy Supportive family The Entrepreneur

18. Is an Entrepreneur Is the Leader/Strategist Principal Marketer Number One Salesman Is the Chief Customer Advocate The Owner/Founder

19. Different Ways to Go into Business

20. Not hampered by previous image or technologies Can choose location, name, logo, relationships Can explore new markets and directions See your dreams come true No base, must build all new Greater risk No track record = difficulty in financing See your dream become a nightmare Start a New Business ADVANTAGES DISADVANTAGES

21. Established clientele, suppliers, location Known quantity, proven formula/name Help in starting and running business Can review records Easier to obtain financing Potential hidden issues: debts, poor reputation, loyalty to owner, out-of-date inventory or transfer issues Valuation of the business No guarantee that success will continue No guarantee the business can be improved Buy a Business ADVANTAGES DISADVANTAGES

22. Proven image and product/service Marketing/Sales power Limited experience Training, professional guidance Continued consulting relationship Access to other franchisees for help Limited control – not full freedom to act Franchise = royalty and other fees Operational boundaries and limited choices Binding contract Franchisor problems are your problems Buy a Franchise ADVANTAGES DISADVANTAGES

23. Allows operation in a not-for-profit status – no owners May qualify for government or foundation grants Protection from liability for directors and employees Can pay salaries to employees and consulting fees for contractors Focus on educational or charitable purposes and cannot profit those who created the organization All profits remain within the organization Must apply and qualify for 501c3 status or sales tax exemption Form a Non-Profit Corporation ADVANTAGES DISADVANTAGES

24. Convenient work location Less expensive Flexible schedule Tax Advantages** - Sq Ft of total home - Percentage of utilities Zoning or deed restrictions Isolation from others Difficult financing Family distractions IRS scrutiny Home-Based Business ADVANTAGES DISADVANTAGES

25. On-line Business ADVANTAGES DISADVANTAGES • Low conversion rates • Low barriers to entry = higher competition • Visitor expectations • No personal contact, so more limited sensory info • Lower startup costs • Expanded geographic reach • Convenience & accessibility • Flexibility

26. Let’s Take a break

27. Marketing

28. Marketing • Actions taken to create and fulfill a demand for a product or service. • Commonly described as actions involving Product (or Service), Placement, Promotion, and Pricing • Also described as anything you do to get and keep a customer • Helps to communicate your desired business image.

29. The Marketing Mix

30. Market Position-Your Value Proposition • What do customers value? • Convenience/Accessibility • Service • Quality • Reliability • How much will they pay? • How broad is the market? • What’s the competition? • Number of competitors • Basis of competition

31. Product offering Functionality Quality Service offering Competence Convenience Combined offerings Advantages Unique features Other benefits? Product and/or Service

32. Placement • Part of the process to fulfill customer expectations • May involve partners or allies • Must be convenient • Includes sales outlets, direct shipment, service centers • Stores, merchandising are key • The web site may be the store for an on-line business • Supply chain definition carefully considered

33. To Achieve Name recognition Brand image Brand identity Through Public Relations Action Incentives Selling Advertising Promotion

34. Price Competition Consumer reaction Direct Cost Total cost to serve Bundling Unbundling Credit terms and discounts

35. Size of operation and number of employees Price and quality Services provided Reputation: strengths and weaknesses Personal visits and observations Suppliers & contractors Other businesses in area Know the Competition

36. Identifying Prospects Qualifying Prospects Making Initial Contact Educating Making presentations Persuading Showing advantages Preparing offerings Closing deals Selling

37. Please complete the “Business Concept Feasibility Assessment” in your handout

38. Details, Details: Legal Forms, Insurance, Regulations, Advisors

39. Sole proprietorship Easiest Suitable for most start-ups Partnerships Require careful preparation MUST have formal agreement, Limited Liability Company MUST have formal agreement Easy to create and maintain Corporation (C or S) Require more administration Offer limited liability Business Organization Forms

40. Property Casualty General Liability Errors and Omissions Product Liability Umbrella Liability Worker’s Compensation Employee Group Health Life (Key employee, partners) Business Interruption Insurance Considerations

41. Licenses and approvals Operating license Local regulations Fictitious names Federal and State Labor Laws OSHA ADA Immigration Laws Income Tax Withholding Social Security Payments Sales Tax Collections and Payments Government Regulations

42. Banker Lawyer Accountant Insurance Agent A “Sounding Board” SCORE Mentor Board of Advisors Business Mentor Board of Directors Every Owner Needs Support:

43. Funding and Cash Management

44. Present or anticipated cost of living Any income not from business Outstanding debt Amount in savings Funds from Investors (e.g. friends and family) Credit History Assets for Collateral Personal Financial Condition

45. Essential Considerations: Tools and equipment Leasehold improvements Licenses and permits Professional fees Initial inventory Working capital reserve fund (Six to Twelve Months of Total Operating Expenses) Start-up Funding Needs

46. Salaries Rent Insurance Taxes and fees Advertising Loan interest/ principal Utilities Maintenance Operating Costs

47. Equity Signifies Ownership Sources of Capital Debt Does NOT Signify Ownership • Personal savings • Family and friends • Partners’ contributions • Profits retained in the business • Banks and credit unions* • Community Express • Micro Loans* • Peer-to-peer lending • Credit cards (not recommended)* Can be guaranteed by SBA

48. Lender’s View of Borrower • Character, Commitment • Credit rating • Cash flow • Collateral, Capital • Industry knowledge • Personal investment • Financial history • Financial projections • Management skills • Competition

49. Open a separate bank account for your business ASAP Deposit all receipts “intact” Use a petty cash fund Separate sales tax receipts on your books Hang on to cash as long as possible Reconcile bank account monthly Cash: Most Important Asset

50. Business and Marketing Plans